IDEAS home Printed from https://ideas.repec.org/p/bls/wpaper/531.html
   My bibliography  Save this paper

Changing Tastes Versus Specification Error in Cost-of-Living Measurement

Author

Listed:
  • Robert Martin

Abstract

Several recent papers aim to account for changing preferences in cost-of-living indexes (COLI). Workhorse models like Constant Elasticity of Substitution (CES) attribute the errors in demand regressions entirely to preferences, leaving no room for other sources of error. Using a Monte Carlo experiment and retail scanner data, I find evidence that model misspecification can lead to misleading conclusions about the degree of taste change reflected in CES-based price indexes. Nevertheless, under misspecification, a Sato-Vartia index still approximates a conditional COLI that fixes tastes to an intermediate level.

Suggested Citation

  • Robert Martin, 2020. "Changing Tastes Versus Specification Error in Cost-of-Living Measurement," Economic Working Papers 531, Bureau of Labor Statistics.
    • Handle: RePEc:bls:wpaper:531
    as

    Download full text from publisher

    File URL: https://www.bls.gov/osmr/research-papers/2020/pdf/ec200130.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Abe, Naohito & 阿部, 修人 & Rao, D.S.Prasada, 2020. "Generalized Logarithmic Index Numbers with Demand Shocks: Bridging the Gap between Theory and Practice," RCESR Discussion Paper Series DP20-1, Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bls:wpaper:531. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jennifer Cassidy-Gilbert (email available below). General contact details of provider: https://edirc.repec.org/data/blsgvus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.